With the pandemic highlighting the importance of having a diversified income, more and more people began getting into investing over the past year. In fact, there are now an estimated 6.6 million personal investment accounts in the UK, and trading levels are three times the normal activity level. Even Vanguard UK reported a three-fold increase in the number of new accounts opened in the first quarter of 2020 alone.
Apart from providing financial security in times of great economic downturn, investing spells a lot of benefits. For instance, putting your money into different types of investments can help you attain your financial goals easier and grow your wealth. When done right, investing can also get you to early retirement and allow you to enjoy reduced taxes.
If these benefits sound good to you, here are some tips that can help you get started with investing:
Figure out how much you want to invest
Contrary to popular belief, investing doesn’t always require a large sum of money. In reality, it’s actually a lot better to only invest money that you can afford to lose — meaning to say, the extra money you have after arranging your budget. Aside from this method, another way you can come up with the optimal amount of money to invest is by thinking about your investment goal.
For this, consider your time horizon and the money you need at the end. From there, you can work backward and break that amount into monthly or weekly investments. Once you’ve figured out the amount of money you are willing to invest, make it a habit to invest a few extra pounds regularly, instead of investing all of it at once.
Know your options
Your choice of investment vehicles depends on several factors: the amount you want to invest, the level of risk you’re comfortable with, and the overall goals you have. Today, there are thousands of investment options across industry sectors and markets — from UK and international stocks and bonds, to exchange-traded funds and commodities. And while you certainly don’t have to invest in them all, it pays to have a healthy mix to manage risk.
To help you familiarise yourself with the different types of investments, here’s a list of some of the basic ones that you should learn more about:
• Stocks
• Securities (Equities, Bonds and Derivatives)
• Exchange-traded funds (ETFs)
• Index funds and mutual funds
• Commodities
• Collective investments (Unit Trusts and Open-Ended Investment Company or OEICs)
• Alternative investments, such as art, real estate, and even invest in whisky casks.
Start (and keep) learning
As the old saying goes, knowledge is power. And true enough, this adage applies to the many different aspects of our life including investing. If you want your investments to provide you with healthy returns, you have to take the time to learn everything there is to learn about investments. As a newbie, you can begin with books that will impart you with relevant information about how the market works as a living system.
From there, you can jump to investment courses that tackle modern financial concepts. This way, you can pinpoint the investment strategies that work and come up with simple rules that suit you and your goals best. It would also be in your best interest to look into the businesses you consider investing in. As noted entrepreneur and avid investor Brent Hoberman once said, “Internet years are roughly comparable to dog years”. And so, in order to keep up with the trends and stay on top of things, it’s imperative for investors to continuously learn and stay sharp on their feet.
Despite how daunting investing can be, if you make an effort to figure out how much money you want to spend, to know the options available, and to put some time into continuous learning, there will surely come a time when your investments can lead to innumerable benefits.
